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5 Jul 2013
Flash: Looking ahead increased risks of rate cuts later this year.
FXstreet.com (London) - Alexandra Fletcher, BofA Merrill Lynch Global Research, said that he will expect economic and inflation developments in line with ECB projections.
He went onto say this would not warrant any rate cuts by itself. However, he has highlighted that credit growth could disappoint as long as the ECB bank balance sheet review – which will likely lead to banking sector consolidation − is not completed. "This, in our view, raises chances that the ECB may need to cut rates later this year, especially if US economic data continue to surprise on the upside, thereby raising the odds of Fed tapering (not our US economic team’s central scenario)".
He went onto say this would not warrant any rate cuts by itself. However, he has highlighted that credit growth could disappoint as long as the ECB bank balance sheet review – which will likely lead to banking sector consolidation − is not completed. "This, in our view, raises chances that the ECB may need to cut rates later this year, especially if US economic data continue to surprise on the upside, thereby raising the odds of Fed tapering (not our US economic team’s central scenario)".